Since the end of 2020, a very serious shortage of microchips has hit many industrial sectors: demand far exceeds world production capacity and factories that use processors have had to reduce shifts or even temporarily close. Begun in the automotive industry, this shortage has spread in recent months to other manufacturing sectors, and according to some analysts it could damage the recovery from the crisis last year, caused by the pandemic.
The crisis has partly economic and partly political reasons. It started in the automotive sector and caused serious damage: in the United States alone, it is estimated that 450,000 fewer cars will be produced this year, with an economic loss of 15 billion dollars. Some estimates are even higher, and there is talk of a loss of over 600,000 cars.
The problem is that the shortage of microchips is spreading to other sectors – it's one of the reasons why some of the latest generation video game consoles are nearly impossible to find. Furthermore, as Reuters wrote, there has been an increase in costs for smartphone makers in recent months and it has become difficult to meet the demand for even common household appliances such as refrigerators and microwave ovens.
This does not mean that you will no longer find smartphones and refrigerators in electronics stores: however, at least in some countries and for some brands, there may be slightly longer delivery times, and the presentation of some new products may be postponed – in some cases has already happened. It is not excluded – even if it has not yet occurred and analysts believe it unlikely – that the difficulties and slowness of production affect consumers with an increase in prices.
– Read also: We don't have enough microchips
Microchips (or simply chips) are fundamental components in many products, not just electronics: even if we often think above all of those present in computers and smartphones, chips are now essential for any device that has at least one electronic part. In a car, for example, there are dozens of them, and they are used to manage the electric windows, the on-board computer, the entertainment system, the airbags, the parking sensors, and so on: these are less sophisticated microchips than those found in a smartphone, but still important.
Microchips have also become increasingly important for apparently less sophisticated appliances, such as household appliances, which in recent years have added new sensors, internet connections and other “smart” functions.
The shortage began last December and has various reasons: the coronavirus pandemic has caused a slowdown in production and a strain on global supply chains: it means that it has become more difficult to gather all the components necessary for production, to process them and then to ship. the finished product; again due to the pandemic, the demand for electronic devices, and therefore for microchips, has increased: in January sales of microchips increased by 13.2 percent compared to a year earlier, and it is likely that part of the demand went unmet .
In addition, the trade war between Donald Trump's former US administration and the Chinese government blocked the businesses of several companies and prompted others (especially China's Huawei) to grab as many microchips as possible last year before falling victim to them. of sanctions and prohibitions. There were also some problems related to the circumstances, such as a fire that destroyed a microchip factory in Japan in October 2020 and the snowstorm that hit Texas this year, blocking two factories in the US state for several weeks.
The automotive sector was hit first and still remains the most damaged: microchips used in cars are less sophisticated and expensive than those used in devices such as smartphones and computers, and the industry works with tighter margins and is willing to pay. less for components; for this reason, when microchips began to run out, car manufacturers were the first to be penalized. This has also been made worse by the fact that, for reasons of efficiency, car factories keep very little inventory, and order components according to how production is going.
In recent months, most car manufacturers have been forced to close numerous factories for shorter or longer periods because they lacked microchips. Things should have improved in the spring, but for now the problems remain: only this week Ford announced that, starting from April 5, it will close six factories in the United States for several weeks due to a shortage of microchips. Among the models affected by these measures is also the F-150, a large pickup that is the best-selling car model ever in the country, and whose production could drop considerably this year.
The gaming industry was another hit soon: Sony and Microsoft, which produce PlayStation and Xbox respectively, put their next-gen consoles on the market at the end of 2020, but months later they still can't meet the huge. question, partly because of the shortage of microchips. Same problem for Nvidia and AMD, which produce graphics cards for computers.
Recently, the shortage of microchips has begun to affect other production sectors, up to and including household appliances. The president of Whirpool in China, for example, told Reuters that in March the company – which is US and produces several types of appliances – was only able to meet 90 percent of demand because it lacked the necessary microchips. Robam, a Chinese brand little known in the West but rather widespread in Asia, has had to delay the marketing of new products. The same goes for other companies.
Foxconn, the world's largest factory of smartphones, tablets and other technological devices, which manufactures on behalf of Apple, Samsung, Microsoft, also said that production could decrease by as much as 10 percent this year, due to the shortage. of microchips. This shows how the crisis is spreading: only in February, the CEO of the company said he was not worried, because the crisis would have a “limited” impact on his sector. A few weeks later he had to change his mind.
– Read also: Because everything about microchips will soon change
Governments are trying to find solutions: US President Joe Biden, for example, signed an executive order in late February calling for a $ 37 billion investment in the microchip industry and a complete overhaul of the supply chain. to be done within 100 days, to find and resolve any inefficiencies. The European Union has promised new investments, while in China the microchip industry has been subsidized and supported for years, also for reasons of technological independence.
Manufacturing companies have also moved: Intel has announced an investment of 20 billion dollars, destined to increase, for the construction of new production factories in the United States and Europe; TSMC, the Taiwanese company that is by far the largest microchip manufacturer in the world, has announced a $ 100 billion investment over three years to increase its manufacturing capacity.
However, none of these solutions is feasible in the short term: the construction of a microchip production factory requires not only huge investments but also a lot of time, and expanding the production of existing factories is difficult, because the production of microchips, especially the most sophisticated, it is extremely complex and requires enormous infrastructures and considerable know-how.
Indeed, the strong centralization of production is one of the main problems that led to the shortage of chips: there are very few factories in the world, and those capable of producing the most sophisticated microchips are only two: TSMC in Taiwan and Samsung in Korea. of the South.
